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They have been responsible for some of the most famous advertising and marketing campaigns in history, but this week the world's big four tobacco companies found themselves on the back foot. In a global test case, they went to Australia's highest court to try to block plans for cigarettes to be sold in unbranded packets.
From December, all cigarettes in Australia will have to be sold in olive-green packs with stark health warnings, graphic photos and no brand logos. Only company names will be permitted in a small, standard font.
British American Tobacco, Philip Morris, Imperial Tobacco and Japan Tobacco International argue that moves to force them to use unbranded packaging are unconstitutional because they allow the government in effect to acquire their property – the trademarks and logos – without compensation.
The case has been watched around the world, including in Britain, where the government began consultation over unbranded packaging this week. On Thursday, New Zealand's government agreed in principle to introduce unbranded packaging for all tobacco products based on Australia's legislation.
Acting for Japan Tobacco International – the owner of Camel and Silk Cut – Gavan Griffith QC said in court that the new legislation would appropriate 100% of the back of each cigarette packet and 70% of the front. The company's rights to its trademark, including the Camel image, would be reduced to a "bare husk". "We say our trademarks are extinguished," he said.
The case centres on a part of the Australian constitution which states the "acquisition of property" by the state must be on "just terms". That is, compensation must be paid.
The government claimed unbranded packaging did not extinguish trademarks, but instead regulated their use. The solicitor general, Stephen Gageler SC, said legislation had been restricting the way tobacco companies operated since the 1970s.
Intellectual property expert Professor Mark Davison from Monash University, Melbourne, expects the government to win. "The tobacco companies were in trouble from the start," he said. "The government has no interest in acquiring the tobacco trademarks for its own use or anyone else's. Therefore, no acquisition of property under the constitution takes place with plain packaging."
The government said it would be "incongruous" for it to compensate a company for requiring it to act to prevent damage to public health. The chief justice, Robert French, suggested the risk of fatal disease from smoking put this case in a "different category".
While the case is specific to Australia's constitution, anti-smoking campaigners say a government win would encourage other countries to follow suit.
"The more countries that go down this path, the bigger the domino effect. That's why the industry is fighting it so hard, because they don't want it to go anywhere else," said Anne Jones, chief executive of anti-smoking group Action on Smoking and Health Australia.
Australia already had some of the toughest anti-smoking laws in the world, which have helped reduce the smoking rate to 16%. Advertising and sponsorship deals are banned, and it is illegal to smoke in public places including bars, restaurants and entertainment venues. In some areas councils have banned smoking in parks and outdoor areas.
Despite this, 15,000 Australians still die each year of smoking-related illnesses. In Britain, where 22% of the population smoke, the figure is 100,000 at a cost to the economy of £13.74bn, according to a 2010 report by the Policy Exchange thinktank.
The World Health Organisation estimates nearly 6 million people throughout the world die from smoking each year, mainly in low or middle income countries. By 2030, it expects this figure to be 8 million. China alone has 40% of the world's smokers.
Whatever the human cost of smoking, tobacco shareholders will not look kindly on unbranded packaging. Their stocks have been remarkably resilient in an otherwise turbulent economic climate.
In 2010 British American Tobacco reported an increase in profits of 5% to £4.3bn. Philip Morris International, maker of Marlboro, the world's biggest brand, reported a 15% rise in profits last year to £8.4bn, largely due to growth in Asia. The company's total shareholder return was a whopping 39.8%.
But how much would unbranded packaging damage their brands?
"Once you start to remove any equity element from a brand, it hurts, whether that's a distinctive colour, shape, graphic or name," said Peter McDonald, lecturer in branding at Sydney University.
While it makes it more difficult for people who buy the product to consider the brand in the same terms as before, McDonald says it will not be the end of the road for the cigarette industry.
"The tobacco industry will need to target customers in other ways. It may brand the inside of the box or change the shape or appearance of cigarettes to differentiate brands and entice customers," he said.
"Another option may be to produce a branded pull-on case for their cigarette packet that would act a bit like an iPhone case and would be instantly recognisable."
The high court has reserved its judgment but is expect to rule before the unbranded packaging legislation comes into force in December.
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